If anyone could shed any further light onto the situation and any insight into how to approach it that would be great.

The situation is that a company I run used a couple of images and short text from another companies website. The images were from a similar item we sell , and it was altered on a photo editing site to resemble ours .
I didnt do this but the buck stops with me and it was stupid , naive.
We received a lawyers letter stating copyright infringement with a view to settling out of court.

Informally the plaintiff has demanded £4,000 - £6000 settlement.
I have said no to that but stated I will make a counter offer.

From what I understand a licence fee for a photo used may be in the range of £700-800
So my counter offer was going to be closer to £1500.
If the demand is over £2000, then I would demand a breakdown of costs
I haven’t admitted liability but wish to settle out of court. I am dealing with the plaintiff who is waiting for my counter offer.
Any suggestions on how to approach it from here and what compensation I should be looking at would be appreciated

You were right to refuse to pay the original amount demanded as it sounds totally unreasonable for a single image.

Indeed if this was just a product shot, its value on the open market would be limited either to other sellers of the product, or websites etc which needed generic shots of gizmos like the one portrayed. The figure of £4,000 - £6000 would be more applicable to highly newsworthy scoop photograph or some fine art photography which you might frame and hang on the wall.

The best way to establish a fair price for a licence is to search on some stock photo websites like Getty or Shutterstock for an image of a similar type of product. Note the cost of the fee for using that image and the duration of the licence, in a category which matches your use (ie company website). Multiply the fee by the length of time the image was up on your website and use that figure as the basis of your counter offer. You should be prepared to add something like 10-15% on top to cover their administrative costs, but I suspect the final figure is unlikely to be over £500 unless you were using the image for a very long time. If you can't find a suitable comparator image, the other way is to ask a number of commercial photographers to quote you a price for photographing a similar product and average out the quotes, again adding the 10-15% uplift for their admin costs.

As they have used a solicitor to draft the demand letter they may well be seeking to recoup that extra cost (probably another £400-500). However, you can resist this claim if you choose, because if the matter were to go to the small claims track of the Intellectual Property Enterprise Court (IPEC), legal fees would not be recoverable, just the normal damages which would be assessed along the lines that I have outlined above. While you obviously don't want the hassle of going to court, you need to be firm in resisting the large element of 'punishment' which appears to be incorpated in the original sum demanded. Civil justice is not about punishment, just restoring the claimant to the position he would have been in if the image had been licensed correctly.

Advice or comment provided here is not and does not purport to be legal advice as defined by s.12 of Legal Services Act 2007

Hi
Thank you for the information shared so far
I think it’s pertinent to say that the infringing image was on our website for 2 years.
It was put on by a designer as a stop gap and was left there really without malice but almost forgotten about as we had 100,s of over photos (all ours) until we received solicitors letter.

We did over that time sell to our customers the item, that the infringed photo portrayed although would have done so regardless if we had used a commercial photographer to photograph our own product or like all of our other photos on the site, taken the photo of the product ourselves.

How do I calculate cost of photo over time?
If it was 2 years on the website, is it licence fee x 2?

To be accurate , it was one photo used, but manipulated 6 times in a photo editor to change its colour. ( am I liable for just the one image though and not 6)

Would I also be liable for other costs such as
Flagrancy
Benefit to infringer

Flagrancy , in defence I acknowledged the error immediately took down the infringing page, and have attempted reconciliation and compensation and have no past history of this

Unless a licence is issued on a one-off, Royalty-free basis, most licence fees are for annual usage, so multiply by two.

The alteration of the original image doesn't amount to a separate infringement. However if there was a copyright notice attached to the original image (either in visible form or in the metadata) and this was removed during the editing process, then this might amount to flagrancy and thus be grounds for additional damages . But apart from that aspect, from what you have told us I can see no other aggrevating or flagrant* circumstances which could affect the damages.

As for the last matter that you ask about, I need to go into some detail. Under the civil law in England and Wales, it is a long established principle that a claimant may opt either for damages based on his loss (eg of the licence fees he would have earned), or what is known as an account of profits, that is, the gain that the infringer makes due to the wrongful use of the copyright work. Then in 2004 the EU issued Directive 2004/48/EC (known as the Enforcement Directive) which was then incorporated into the UK legislation by the Intellectual Property (|Enforcement) Regulations 2006 (SI 2006/1028). Among other things Regulation 3(2)) introduced a new requirement for the courts when asssessing the level of damages, which appears to run completely counter to the previous doctrine:

(2) When awarding such damages—

(a) all appropriate aspects shall be taken into account, including in particular—

(i) the negative economic consequences, including any lost profits, which the claimant has suffered, and any unfair profits made by the defendant; [...]

This wording is taken directly from the EU Directive, but many people question exactly how it is supposed to be interpreted. The doubt surrounds the word 'unfair'. It has been contended that where the actions of an infringer directly lead to the loss of sales or other benefit for the claimant, this is an 'unfair' profit. So for example if a sale of your product, as represented in your image, could be said to have deprived the claimant of a sale of his product because the two articles competed directly in the same market place, this would be an unfair profit to you. Others, including it would seem His Honour Judge Hacon in the Absolute Lofts case, have interpreted the phrase to mean any profit which the infringer may have made. If you have read the Absolute Lofts judgment (linked to by ATMOSBOB) you will know that the company Absolute Lofts Ltd operated in the South West London area, whereas Artisan Home Improvements Ltd (the defendants) were based in Bradford in Yorkshire. Clearly in that case no customer in London would have instead chosen a Yorkshire company, based on the images shown on the Artisan website, and so a gain for Artisan was not a commensurate loss for Absolute Lofts.

So to return to your case, it would appear that the two products, yours and the claimant's, compete within the same market, meaning that the narrower interpretation of Regulation 3(2) might operate against you. However it is worth bearing in mind that you haven't yet reached the litigation stage and so additional damages of that sort may not apply.

And finally, the word profit should bear its normal meaning, namely the nett amount from sales of the relevant item after any costs of production, shipping, VAT and other fixed overheads etc have been deducted.

*For example in the Absolute Lofts case, the Judge found there was flagrancy because Artisan represented the pictures of loft conversions as their own work. In your case you took steps to alter the photograph so that it matched your product and the use of the image was not intended to deceive visitors to your site.

Advice or comment provided here is not and does not purport to be legal advice as defined by s.12 of Legal Services Act 2007

Again thank you for your detailed description to this. It’s all very helpful.

You say there is contradiction of eu law and English civil law..
Does it make a difference in this case if the plaintiff is from a European country outside the eu.?
Also the fact that we don’t operate in the same market place as they don’t distribute within the UK.
I think in this case they would struggle to prove they have lost any sales as they aren’t in the uk market place...?

I see what you’re saying with the loft conversion case , both were in different geographical areas,
And there are parallels to my case in this context.
However my market place is wholesale ,only selling to my direct retail customers, not an open marketplace,so my sales cannot possibly infringe unless the plaintiff was in the same market place/ country which they aren’t .
We have Similar products sold in different countries.

Also to be certain, would they only be able to seek profits for the sales attributed through the website ? The infringed image is only on the website.
Website sales account for approx 10% of all sales with the remaining sales not being attributed to sales through the website at all.
And even that would be hard to assertain, as all sales via website and sales reps on the road aren’t separated on any system I have.

Also all orders placed through the website aren’t attributed through the image in question,as customers have all bought initially through the physical sample then reordered in the website on occasion regardless of the image. Does this account for anything..?

When putting the image out into the world seeking buyers, this is one thing, but our website is a closed platform to the general public.
Does this make any difference? And would it be up to me to separate website orders from , other sales?

Also what % of the profit would they be able to seek? Is it usually a % of profit or all profits made?
Am I right in saying that looking to seek profits takes it out of the fast track court system with heavier legal fees ?

My questions above relates therefore to my first notion that informally the plaintiff has asked for £ 4000-£6000 which maybe to include these damages arising from the directives you have highlighted.
The plaintiff may suggest that a licence fee payment is one thing but a share of profits is another thing which to include.

Therefore should I treat the counter offer with or without reference to these 2 highlighted conflicting directives , that could end up costing me more if it went to court.

Also the fact that we don’t operate in the same market place as they don’t distribute within the UK. I think in this case they would struggle to prove they have lost any sales as they aren’t in the uk market place...my market place is wholesale, only selling to my direct retail customers, not an open marketplace, so my sales cannot possibly infringe unless the plaintiff was in the same market place/ country which they aren’t. We have similar products sold in different countries.

If a court was to take a similar approach to that adopted by HHJ Hacon in the Absolute Lofts case, then I don't think this distinction would be that significant, as thrust of the interpretation was that any profit made would be unfair. As a slight digression, I think from reading between the lines of the judgment (see paragraph 31 in particular) in Absolute Lofts, the defendant did or said something to upset the judge (not a good idea) and therefore the judge more inclined to follow the suggestion of the complainant's counsel, and to exact the maximum damages for the defendant within the discretion of the court's powers.

would they only be able to seek profits for the sales attributed through the website ? The infringed image is only on the website. Website sales account for approx 10% of all sales with the remaining sales not being attributed to sales through the website at all. And even that would be hard to assertain, as all sales via website and sales reps on the road aren’t separated on any system I have. Also all orders placed through the website aren’t attributed through the image in question,as customers have all bought initially through the physical sample then reordered in the website on occasion regardless of the image.

In an ideal world, I would argue that only sales which could be directly attributable to the presence of the image should be taken into account, but as I have already mentioned, HHJ Hacon's approach might encompass a wider view. If this was ever to go to court (and I suggest that is unlikely) then it would be up to your counsel to argue very forcefully that only the limited number of sales made through the website alone should be counted.

When putting the image out into the world seeking buyers, this is one thing, but our website is a closed platform to the general public. Does this make any difference? And would it be up to me to separate website orders from, other sales?

I don't think the reach of the website is relevant, since infringement can occur even without the 'publication' aspect. If this was a claim about passing off then yes this would be a signicant point in your favour.

Also what % of the profit would they be able to seek? Is it usually a % of profit or all profits made?

Once the court had established to nett profit then the whole of that amount would be the 'unfair profit' and thus it could be the amount of the additional damages under that heading. However assuming that you had a skillful barrister handling your case, I would expect him to have presented all the points that you have made, and to to have persuaded the court that taking the full amount was manifestly unfair and disproportionate.

Am I right in saying that looking to seek profits takes it out of the fast track court system with heavier legal fees? My questions above relates therefore to my first notion that informally the plaintiff has asked for £4000-£6000 which maybe to include these damages arising from the directives you have highlighted.

The general rule is that if the amount of the claim is under £10,000 then it should go on the small claim track (as you may have seen elsewhere on the forums, I think calling it a fast track would be a misnomer!). However either party can ask for it to be elevated to the multi-track IPEC system; if that happens, the other party needs to agree to this. And to bring this all back to the real world, at present we are just talking about a simple demand letter with, I assume, no mention of EU Directives or the sort of damages the complainant might or might not seek in court. In countering his claim you need to know, in rough terms, how strong your defence might be and what the worst case damages might be. Neither party will want to go to court because that just introduces more expense, delay and stress, and so this too needs to be factored in to arrive at a quick settlement which suits both parties. Let's face it, pragmatically speaking this other company has lost absolutely nothing because of the infringement: no sales, no licence fees (because the image wasn't being offered for licence) and no other detriment. Therefore anything they get out a settlement is a bonus. I would go so far as to say that it is quite possible it was not the company who initiated this whole process, but a copyright claim management company which we have discussed elsewhere on the forums, who stand to make a hefty fee out of the deal.

Therefore should I treat the counter offer with or without reference to these 2 highlighted conflicting directives, that could end up costing me more if it went to court.

I think that is the best way forward is to ignore all reference to the two approaches to damages, and just work with simple amounts, based on what you are prepared to pay to settle the matter once and for all.

Advice or comment provided here is not and does not purport to be legal advice as defined by s.12 of Legal Services Act 2007

I think ist impossible to say from a simple forum post whether an amount of 4000 to 6000 GBP is too much or very reasonable.

Looking at market rates is only relevant if the image is not one that is available to licence on the open market. If this is a professional image then the value of the image will be what the photographer normally charges and not what other people charge. The relevant case law would be Irvine & Ors v Talksport Ltd [2003] EWCA Civ 423 http://www.bailii.org/cgi-bin/format.cg ... ksport+)) . Another case to look at would be Jason Sheldon v Daybrook House Promotions Ltd [2013] EWPCC 26 http://www.bailii.org/cgi-bin/format.cg ... (+house+))

Be aware that despite the internet age, there are still professional photographers out there who charge thousands for image use.

Where market value is relevant is if, like the Absolute Lofts case, the image was taken by a company for its own marketing and would not normally be offered for sale. In that case the court will consider market rates.

Once the value of the work has been determined, then comes additional damages. Commercial use of a work without permission will almost certainly be seen as Flagrant no matter what the circumstances. Even if it wasn't both the Inflammation Society Directive and the Enforcement Directive call for damages to be "dissuasive".

Its hard to imagine any other Interpretation of "dissuasive" than that an unlawful user of a work must pay very much more than a lawful user of a work.

Its the same principle as catching a train without a ticket. If one just had to pay the normal tickt price when caught without one, then nobody would buy a ticket and benefit from the high chance of not being caught.

In almost all the cases I know about that have come before the Intellectual Property enterprise Court, the court has awarded significant additional damages, in most cases multiples of the normal value of the works and typically 4 figures sums per image.

Having said that, issuing a claim in the High Court is not fun and no doubt the claimant will be happy to reach an out of court settlement. Its impossible to know what the claimant is thinking and what he might expect, but most claimants are probably flexible, however if your claimant believes the infringement is worth 4000 to 6000 GBP then I cant imagine him accepting a few hundred pounds unless his claim is seriously flawed.

Your best approach is to do some research on the normal value of the work and then seek to negotiate from there. Jaw Jaw is better than War War.